While organizations and startups may have heard about OKRs, most of them are probably new to this kind of organizational and management concept.
Considered to be the father of management science, OKRs were first introduced by Andy Grove, former CEO of Intel. He gleaned inspiration from Peter Drucker’s MBO (Management by Objectives), whose method focused on results and the overall strategy instead of individual targets.
Grove’s OKR method developed a system that emphasizes the execution of the actual work taking place and aligns the results of this work to the company’s overall strategy. Today, successful companies such as Youtube, Google, Intel, Twitter and The Gates Foundation use OKRs as an efficient framework to organize their targets.
This article will discuss an overview of the OKR framework, its importance for teams in the organization and why team leaders and employees should use OKRs.
OKRs: The Basics
Something distinctive about OKRs is the fact that it is both a goal-setting tool and a management framework at the same time. It efficiently synchronizes every organizational member to align towards its short and long-term goals strategically.
Since traditional organizations mostly leave the goal-setting process exclusively to the top management, employees are mostly left to their own devices without fully understanding the value of their work and how it contributes to the goals set by their team leaders.
OKRs are a tool to ensure a unified cadence that will track progress in the entire organization and bridge the gap between strategy and execution among the workforce.
Rather than running 10 or 20 projects concurrently, the OKR philosophy channels your valuable time, energy, creativity, intellect and hard work into the things that really matter. Doing this aligns everybody and creates a massive positive impact.
Essential Characteristics of the OKR Framework:
It’s meant to be simple.
OKRs are very straightforward. It’s very simplistic nature ensures that no one will be confused if they have achieved their OKR or not.
It embraces org-wide transparency.
Since the goal of creating OKRs is to achieve alignment in the organization, transparency is an essential element that contributes to this endeavor.
It’s dynamic and agile.
Goals in OKRs are never designed to be static, rigid and stale. A team or individual’s objectives should adapt to the changing factors of the company as it grows and evolves. Regular OKR reviews ensure that the OKR framework will always be dynamic.
It encourages ambitious goals.
The OKR framework facilitates that extra push that teams and individuals need to grow in the company. By setting ambitious goals, this framework aims to stretch an individual’s capabilities and lays the groundwork that an employee needs in order to grow.
Basic Structure of OKRs:
OKRs stands for “Objectives and Key Rey Results.”
As the name suggests, this framework breaks down a company, team or individual’s goal into clear objectives and attainable results.
Objectives refer to the qualitative, often inspirational, and time-bound goals that a company, team or individual sets to achieve. It’s usually set every quarter where objectives are set as actionable statements that are aligned with the company’s mission and vision. It usually sets the standard and tone by how work in the company is done for the rest of the year.
While Key Results (KRs) are the quantifiers that break down an objective into specific metrics. It measures the actionable requirements that will show how to achieve the objectives. It should be clear, concise, specific and easily measurable.
Objective: Increase online sales for 2022.
- Increase online customer orders by XX%.
- Increase enrollment of customer loyalty programs from A to B.
- Attract XX new online customers per month.
OKRs VS KPIs: What’s the Difference?
While they complement each other, OKRs and KPIs are not the same. Both may be used in goal-setting activities, but they still differ from each other.
Some teams use KPIs (Key Performance Indicators) to ensure that they are making progress on their tasks. As such, KPIs serve as measurable metrics that monitor the progress of a specific task or goal. It usually varies depending on the industry in which the organization operates. Here are some commonly used KPIs:
- Net Profit Margin
- Return on Investment (ROI)
- Retention Rate
- Online Abandoned Cart Rates
- Average Order Value
These KPIs are not unique to a specific team or department. They are indicators that are universally accepted and used in the industry. These are measurable, and setting goals around these KPIs will usually involve numerical targets.
On the other hand, OKRs are the actionable statements that form an entire system of objectives broken down into specific and actional goals. It should also be noted that not all aspects of the OKR framework are quantifiable and measurable.
An OKR starts with an ambitious and inspirational goal that will be broken down into small and quantifiable milestones. KPIs mainly focus on the quantitative aspect of goal-setting, while OKRs strike the right balance between a goal-setting’s qualitative and quantitative factors.
Benefits & Advantages of OKRs
Benefits of OKRs for Teams
A clear focus on team and company alignment from strategy to execution.
OKRs teach teams to be more focused and results-oriented. Companies can craft the overall direction of the whole company and have teams craft OKRs based on the organization’s goals. OKRs help teams stay aligned and ensure that every team member will deliver results that benefit the organization.
Teams take pride in the work of contributing to the company’s growth.
Teams need to alight OKRs with the company objectives and contribute to them. With this, the company is creating a unified cadence of objectives. Each team member can take pride and ownership in delivering results that contribute to the company’s growth. This is why every team member should be responsible for writing their own collaborative OKRs and decide how they will contribute their time and energy in achieving their goals.
Org-wide transparency that will lead to the team’s engagement, growth and innovation.
Organizations use OKRs to drive growth and innovation. Utilizing the OKR framework means that team members are working together to think about what they can contribute to achieving the company’s objectives. The OKR framework highlights the importance of effective teamwork, alignment and accountability where everyone in the team is focused on working smarter, not harder, in achieving their objectives.
Advantages of OKRs for the Organization
OKRs make it easier for employees to connect individual projects to org-wide objectives. It helps employees be reminded of their “why,” including the company’s mission, vision and values.
OKRs sets the team up for a common purpose and goal. It identifies an organization’s priorities and makes it open for everyone to contribute to achieving the company’s goals.
OKRs contribute to the dialogue of achieving common goals. It becomes a tool for interpersonal communication where every team member can work together to achieve the key results they are aiming for.
OKRs foster a culture of employee engagement and teamwork. It ensures a high level of employee engagement and boosts the company’s morale.
OKRs make everyone accountable for the objectives they set. There is a focus on outcomes that keeps everyone in touch with their progress and reminds everyone of the short and long-term vision of the company.
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#stratapp makes it easy for you to align everyone in a way they feel empowered and part of the journey. It allows you to roll out your OKR implementation progressively. It’s powered by org design so that you can add org design attributes to each objective and key result.
This allows you to filter the OKR dashboard by org design – so you can quickly view the progress of the company, your teams and the OKRs you own.
Everyone can see how what they are working on contributes to the overall goals. No chaos. No confusion. No excuses. Everyone aligned. Everyone motivated.